Hardship Compensation during Redevelopment is Non-Taxable Capital Receipt: ITAT Mumbai

Krishnakan Sharma Vs ITO (ITAT Mumbai)

In a significant ruling for urban re-development projects, the Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has declared “hardship compensation” received by flat owners from developers as a capital receipt, thereby exempting it from income tax. The decision, pronounced on April 4, 2025, in the case of Krishnakan Sharma versus the Income Tax Officer (ITO), consolidates the tax position on such payments, which are common in Mumbai’s extensive re-development landscape.

The appeal by Krishnakan Sharma challenged an

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